Carbon Footprint Accounting & Strategy PDF

Carbon footprint accounting management and strategy In this module ❑ carbon accounting ❑ carbon mitigation principles and strategies ❑ net zero definition and evaluation 2 Carbon accounting CARBON ACCOUNTING DEFINTION Carbon accoun...

Carbon footprint accounting management and strategy In this module ❑ carbon accounting ❑ carbon mitigation principles and strategies ❑ net zero definition and evaluation 2 Carbon accounting CARBON ACCOUNTING DEFINTION Carbon accounting is a process that aims to quantify the greenhouse gas (GHG) emissions produced directly and indirectly by an entity, such as an organisation, a product, a project or even an individual. Carbon accounting therefore involves calculating how much carbon is emitted into the atmosphere as a result of human activities. Carbon accounting provides a framework for assessing and managing carbon-related environmental impacts. KEY DATES IN THE CARBON FOOTPRINT HISTORY 1988 : creation of the IPCC. 1997 : Kyoto Protocol introducing the first targets for reducing greenhouse gas emissions and introducing market mechanisms such as emissions trading. 1998 : launch of the GHG Protocol, which becomes the global standard. 2004 : ADEME carbon assessment 2005 : EU launches the EU ETS, the first major market in carbon allowances. 2006 : ISO 14064 standard. 2015 : Paris Agreement adopted at COP21 to limit global warming. Carbon pricing initiatives around the world. OBJECTIVES OF CARBON ACCOUNTING Measure greenhouse gas (GHG) emissions : quantifying the GHG emissions produced by an entity, be it a company, a municipality, a product or a service. This includes direct emissions (for example, those resulting from the combustion of fossil fuels) and indirect emissions (such as those linked to the supply chain). Identify sources of emissions : determine the main sources of emissions within an organisation or process and target effective reduction efforts. Monitor progress : track the effectiveness of GHG reduction strategies over time and communicate to stakeholders. BENEFITS OF CARBON ACCOUNTING Managing the risks and opportunities associated with the transition to a low-carbon economy: helps to identify risks and highlights opportunities for developing new, more environmentally-friendly products or services. Meeting stakeholder expectations : communicating their commitment to sustainability and their environmental performance. Complying to regulation : climate legislation is increasingly stringent. Regulatory reporting (BEGES) or voluntary reporting (CDP). Developing a competitive advantage : a key factor in winning tenders from both large companies and local authorities. GHG PROTOCOL ❑ The Greenhouse Gas Protocol (GHG Protocol) is a set of internationally recognised standards for the accounting and reporting of greenhouse gas (GHG) emissions. ❑ Launched in 1998 and adopted in 2001, it was developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) to provide a common methodological framework for quantifying and managing GHG emissions. GHG PROTOCOL ❑ The Greenhouse Gas Protocol (GHG Protocol) is a set of internationally recognised The GHG Protocol defines how organisations can measure, report and effectively reduce their GHG emissions. ❑ It covers a wide range of emissions, from direct production processes to indirect emissions associated with the supply chain and product use. ❑ By 2016, 92% of the 500 largest US companies had adopted the GHG Protocol. GHG PROTOCOL METHODOLOGY ❑ Define the operational scope: Activities, sources of emissions and GHGs to be included. ❑ Collect data Gather the information needed to calculate emissions: data on energy consumption, industrial processes, product use and other activities that generate GHGs. ❑ calculation methods and emission factors o Select the appropriate calculation methods for each type of emission o Use emission factors to convert activity data into GHG emissions. SCOPES The GHG Protocol corporate standard classifies a company’s greenhouse gas emissions in three scopes (GHG Protocol, 2004) : Scope 1 denotes direct GHG emissions occurring from sources that are owned and controlled by the issuer. Scope 2 corresponds to the indirect GHG emissions from the consumption of purchased electricity, heat or steam. Scope 3 are other indirect emissions (not included in scope 2) of the entire value chain. Their calculation requires wide- scale collaboration along the value chain raising concerns around inaccessibility of information, confidentiality, alignment, and scalability. Carbon Accounting Sustain Life 7,34 https://www.youtube.com/watch?v=ON41g_RzM8M&list=PLIe24cfJlEM-bSOIkL3P5G_RGyudhtORb&index=4 FOCUS SCOPE 3 Scope 3 categories 1, 11 and 15 (i.e., purchased goods and services, use of sold products and investments, respectively) contribute to 75%of total value- chain emissions.  FOCUS SCOPE 3 Scope 3 PWC Microsoft https://www.youtube.com/watch?v=cpKRv-3NKRs Case Study : Car manufacturer ▪ In the case of a car, Scope 1 includes emissions that are generated by the manufacturing as well as its assembly into a final product on a company’s production line. ▪ Scope 2 emissions are GHGs created from the usage of the electricity supplied by an energy company to the facility where the car is assembled. ▪ Scope 3 emissions are GHGs generated from the upstream sourcing of materials - such as aluminium, zinc, plastic, rubber, and others. Scope 3 also includes the delivery of the engine and other parts to the site of the car manufacturer and the use of the car by a consumer and the end-of-life (which are downstream activities).  Case Study : Danone Supply chain Rationale Danone’s focus on its agricultural supply chain is motivated by the substantial percentage of its carbon footprint (around 62 per cent) that derives from the production of milk and other agricultural raw materials in its supply chain. Action: promoting regenerative agriculture As part of its goal to become net zero by 2050, multi-local food and beverage company Danone is promoting regenerative agricultural practices across its supply chain, including with the 58,000 farmers it works with directly. Challenge Promoting regenerative agriculture means going against the tide of long- standing industry practices and market trends. In developed economies in particular, the food industry has promoted an industrial model of agricultural production that places short-term yields above climate mitigation and other environmental concerns.  Case Study : Danone Supply chain Supplier engagement: positive persuasion Danone’s approach is rooted in working closely with its farming suppliers to persuade them of the long-term advantages of regenerative agriculture. Common regenerative farming techniques include a reduction in tillage, limiting chemical inputs and using cover crops. From a climate perspective, these measures and others like them increase carbon sequestration in soils, but also strengthen biodiversity and improve water retention. For farmers, fundamental benefits revolve around enhancements to soil health and fertility, which in turn lead to higher and more sustainable yields. Switching to regenerative agriculture includes some upfront costs and may result in an initial reduction in yields, but farmers typically reach a break-even point within two to three years, according to Danone SCOPE 4 = AVOIDED EMISSIONS ? Companies are increasingly interested in estimating and making claims about the GHG impacts of their products, relative to the situation where those products do not exist. These comparative impacts may be estimated as the difference in total life- cycle GHG emissions between a company’s product and some alternative product that provides an equivalent function ▪ Dating back to 2013, the GHG Protocol identified avoided emissions as emission reductions which occur outside of a product’s lifecycle or value chain, but as a Source vidia result of the use of the product. SCOPE 4 = AVOIDED EMISSIONS ? ❑ Avoided emissions could involve products like low-temperature detergents, fuel-saving tires, energy-efficient ball bearings, or teleconferencing services. ❑ There is no generally accepted methodology for calculating and reporting on Scope 4 emissions, presenting risks of significant variation in the calculation and communication of Scope 4 emissions and the potential of greenwashing.  Case Study : Philips transformation Back in 2006, Signify (formerly Philips Lighting) issued a global call to phase out traditional, incandescent light bulbs. At the time, Signify was the market leader in this product sector. Rationale In 2006, Signify’s own calculations revealed that lighting was responsible for one- fifth of global electricity consumption. Conscious that this was incompatible with a climate-secure future, the company set itself the challenge of developing more energy-efficient lighting solutions while advocating for a global market transition to more climate-friendly solutions. In doing so, it aimed to retain its leadership in the market, while at the same time helping its sector as a whole transition towards net zero.  Case Study : Philips transformation Challenge consisted of overcoming hurdles to the industry-wide uptake of LEDs. This involved not only proving the technical viability, cost savings and environmental advantages of LEDs to industry peers, but also engaging policymakers on regulatory reforms that would speed up the transition. The sharing of Signify’s transition scenarios provided impetus on both fronts, In 2007 and 2008 respectively, US and European policymakers announced a phase-out of incandescent light bulbs, thus galvanising other lighting companies and countries into action. Business model innovation The decision to phase out incandescent light bulbs pushed Signify to reprioritise and ramp up its research and development work. This enabled it to rapidly transform its nascent LED technology into a market-ready and ultimately market- shifting product. Over time, Signify’s net zero strategy has also led the company to move into new business areas, such as digital solutions linked to the Internet of Things and leasing light-as-a-service (rather than selling the hardware). Carbon mitigation CARBON MITIGATION LEVERS The ADEME (Agence De l'Environnement et de la Maîtrise de l'Energie) distinguishes three types of projects on which to act: ▪ The change of our mode of consumption of energy (recycling, reduction of transport). ▪ The development of renewable energies. ▪ Forestry (by extension management of carbon sinks). It is necessary to commit to the transformations and to finance them. CARBON REDUCTION AT A COMPANY LEVEL SOURCE CARBONE 4 CARBON MITIGATION STRATEGY CARBON MITIGATION HIERARCHY CARBON REDUCTION AT A COMPANY LEVEL Decarbonation strategy Seche Environnement https://www.youtube.com/watch?v=kN4sLlClOtM&t=31s CARBON REDUCTION AT A COMPANY LEVEL IN PRACTICE By carrying out a carbon assessment and establishing a decarbonisation strategy (GHG Assessment), By analysing the life cycle of products and implementing eco- design strategies, By measuring the impact of reduction projects and ensuring project traceability, Source Komio CARBON REDUCTION AT A COMPANY LEVEL IN PRACTICE Digital technology has become an essential tool for diagnosing, measuring, automating and financing the transition, leading to an exponential rise in the number of start- up companies. CARBON REDUCTION AT A COMPANY LEVEL IN PRACTICE Required changes in the orgainzation to meet decarbonization objectives Source Engie net Zero report 2024 ENGIE Impact commissioned independent research consultancy Meridian West to conduct research among 515 senior decision-makers from various sectors and countries through online research during Q3 2023.  Case Study : Amazon Sustainabilty report In a blog post released alongside the sustainability report, Kara Hurst, Vice President and Head of Worldwide Sustainability at Amazon, said : ▪ “Reaching net-zero carbon by 2040 requires Amazon to reduce its carbon footprint across our entire business, including our vast global supply chain. Like many companies of our size, this is challenging, as these are activities that take place outside our direct operational control.” ▪ “We know that to decrease our carbon footprint, we must work with our supply chain partners to help them decarbonize their own operations. Beginning in 2024, we’re updating our Supply Chain Standards to require suppliers to share their carbon emissions data with us and set carbon goals.” ▪ “Our potential for impact across our supply chain is big because it spans building materials, transportation, technical equipment, products, and packaging, and we look forward to having further impact in supply chain decarbonization.” Additional highlights from the report included the company’s progress in its energy transition, with Amazon confirming that it is on track to power its operations with 100% renewable energy by 2025. Amazon grew its renewable energy capacity by 8 GW in 2022, setting a record for the most announced by a company in a single year, according to the report. The company also reported that it grew its fleet of electric delivery vehicles to 9,000 in 2022, with a goal to reach 100,000 by 2030. Case Study : L’Oréal environmental commitments By 2030 l’Oréal aim to have : o 100% of the water used in their industrial processes recycled and reused in a loop. o 50% reduction of CO2 emissions by compared to 2016 of their strategic suppliers o 95% of ingredients in formula biobased, derived from abundant minerals or from circular processes. o L'Oréal has partnered wіth supplіers to ensure that the іngredіents are grown wіthout pestіcіdes or chemіcal fertіlіzers. o o L'Oréal also іnvested €1 bіllіon іn a program aіmіng to make all іts packagіng recyclable or compostable by 2030 o L’Oréal Group’s North Asia Zone has achieved carbon neutrality in 2022 across all operated sites, plants, distribution centres, offices and research & innovation centers. Decarbonizing Operations is a Business | Schneider Electric https://www.youtube.com/watch?v=9aXXmBL5tpM  Case Study : Circular economy Definition by the European parliament The circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. In this way, the life cycle of products is extended. In practice, it implies reducing waste to a minimum. When a product reaches the end of its life, its materials are kept within the economy wherever possible thanks to recycling. These can be productively used again and again, thereby creating further value. This is a departure from the traditional, linear economic model, which is based on a take- make-consume-throw away pattern. This model relies on large quantities of cheap, easily accessible materials and energy. Case Study : Circular economy RELEVANCE OF CIRCULARITY FOR SDG ACHIEVEMENTS Case Study : Circular economy CIRCULAR ECONOMY BUSINESS DRIVEN OPPORTUNITIES Case Study : Circular economy What Is the Circular Economy? – YouTube https://www.youtube.com/watch?v=3xf_im7VUT0 Net zero trajectories  WHY NET ZERO ? ▪ In order to meet the 2°C or 1.5°C targets, global carbon neutrality must be achieved before the middle of the century. ▪ Global carbon neutrality is the balance between anthropogenic CO2 emissions and anthropogenic CO2 absorptions. Removing as much CO2 each year as we emit is the only way to stabilize temperatures in the future. THE NET ZERO MATHS The majority of Swiss vote for carbon neutrality Nearly 60% of Swiss people agree that their country should be carbon neutral by 2050. Since 2019, there has been a major debate around aligning the country's energy policy with the Paris Agreement. An initial popular initiative for the glaciers had been launched, calling for a total ban on fossil fuels - oil, fuel oil, gas and coal - from 2050. Parliament and the federal government found this position too radical. They therefore proposed an alternative: a law to enshrine the goal of carbon neutrality in the Swiss Constitution and completely change the energy model. republicans call for a ban on net zero commitments Ambitious scenario … … WITH MAJOR CONSEQUENCES ON JOBS NET ZERO ≠ COMPANY NEUTRALITY ▪ A company's carbon neutrality can always be achieved each year, by immediately offsetting emissions through the purchase of carbon credits. ▪ But the potential for absorption on the whole is not equivalent to the potential for reduction and the temptation of net-zero corporate advertising maintains the belief in the possibility of cancelling the climate problem at little cost. NET ZERO ≠ COMPANY NEUTRALITY ▪ The company must no longer aim to achieve immediate neutrality, but to dynamically manage its climate performance in order to maximize its contribution to achieving global neutrality. ▪ The company assesses the compatibility of its activity with a world on the way to carbon neutrality through several indicators that better reflect this complexity. It must contribute at the right level to the achievement of this net-zero planetary objective, on different lines of action  What's the difference between net-zero and carbon neutral? https://www.youtube.com/watch?v=kY9XESNFrxI Case study : net zero strategy for a utility company NET ZERO VALIDATION BY SBT ▪ The Science Based Targets initiative was jointly created in 2015 by the Carbon Disclosure Project (CDP), the United Nations Global Compact, the World Resource Institute (WRI) and the World Wildlife Fund (WWF). Today, it is one of the best practical tools for companies that want to make a commitment to the climate. By promoting a climate policy in line with science ▪ It promotes innovative approaches that allow companies to set GHG emission reduction targets that are consistent with their business sector, ▪ The method is primarily based on the distribution over time of the carbon budget adapted to a 1.5 trajectory. NET ZERO VALIDATION BY SBT ▪ The method adopted is based on a global scenario disaggregated into specific scenarios (geographically or sectorally), and then assigns each economic actor an appropriate carbon target ▪ If all companies were to use a harmonized method to define their carbon strategies, the resulting dynamic would be favorable to keeping the rise in average global temperature below 1.5%.  NET ZERO VALIDATION BY SBT SBTI Recommendations for science-based corporate net-zero targets 1. Boundary: A company’s net-zero target should cover all material sources of GHG emissions within its value chain. 2. Transparency: Companies should be transparent about the sources of emissions included and excluded from the target boundary, the timeframe for achieving net-zero emissions, the amount of abatement and neutralization planned in reaching net-zero emissions, and any interim targets or milestones. 3. Abatement: Companies must aim to eliminate sources of emissions within its value-chain at a pace and scale consistent with mitigation pathways that limit warming to 1.5°C with no or limited overshoot. During a company’s transition to net zero, compensation and neutralization measures may supplement, but not substitute, reducing value chain emissions in line with science. At the time that net zero is reached, emissions that are not feasible for society to abate may be neutralized with equivalent measure of CO2 removals. 4. Timeframe: Companies should reach net-zero GHG emissions by no later than 2050. While earlier target years are encouraged, a more ambitious timeframe should not come at the expense of the level of abatement in the target. 5. Accountability: Long-term net-zero targets should be supported by interim science-based emission reduction targets to drive action within timeframes that are aligned with corporate planning and investment cycles and to ensure emission reductions that are consistent with Paris-aligned mitigation pathways NET ZERO VALIDATION BY SBT Case study : Google net zero strategy ❖ At Google, our goal is to achieve net-zero emissions across all of our operations and value chain by 2030. We aim to reduce 50% of our combined Scope 1, 2 (market-based), and 3 absolute emissions (compared to our 2019 base year) by 2030, and plan to invest in nature-based and technology-based carbon removal solutions to neutralize our remaining emissions. ❖ Our net-zero goal is supported by an ambitious clean energy goal to operate our offices and data centers on carbon-free energy, such as solar and wind. ❖ In our third decade of climate action, we continue to take a science-based approach to our efforts, while sharing our own lessons and progress with others. Net zero Energy Building https://youtube.com/watch?v=74dMnnNpDbQ&feature=share MEASURE OF COMPANY TRAJECTORY : TEMPERATURE MEASURE OF COMPANY TRAJECTORY : TEMPERATURE  MEASURE OF COMPANY TRAJECTORY : TEMPERATURE NET ZERO EVALUATION  NET ZERO EVALUATION ODDO advices for evaluation of net zero strategies Companies management are Reports must contain interim Its commitment and Aligning influence required to report publicly on targets (including targets for progress reports and lobbying actions their progress towards these 2025, 2030 and 2035) and must cover all with the Net Zero targets, ensuring that claims and strategies for achieving these emissions and all commitment ambitions to achieve net zero targets in line with IPCC emissions and value Voluntary leadership emissions alignment with such a modelled net zero greenhouse chain operations in all and make public all trajectory are based on a gas trajectories or the IEA jurisdictions their lobbying foundation of concrete actions (NZE), audited by a third party. activities and the and not just promises. positions defended NET ZERO EVALUATION ‘Say on Climate’ is a resolution placed on the agenda of the Annual General Meetings (AGMs) of listed companies. These resolutions enable shareholders to vote on the company's climate policy each year, and to engage in a dialogue on environmental issues. In 2021, some fifteen companies across Europe, including giants such as Vinci and Total, have tabled ‘say on climate’ resolutions, reinforcing discussions between investors, NGOs and companies. Some French investors are committed to the widespread adoption of these resolutions, notably through the FIR (Forum pour l'Investissement Responsable). In March 2023, 46 signatories (€3,000 bn AuM) signed a petition calling for the systematization say on climate" for the most carbon-intensive sectors. The French Minister of Finance did not back this requirement.  NET ZERO EVALUATION Follow This : “With their votes against climate resolutions, most large asset managers stall climate action and enable Big Oil to continue to cause climate breakdown.” “US and UK investors apparently believe they must choose between profits and climate, but this is a false dilemma construed by the oil and gas industry. The current windfall profits of oil and gas should be used to invest in new sustainable business models instead of more fossil fuels.” END OF THE WORLD VS END OF THE MONTH END OF THE WORLD VS END OF THE MONTH Global investment in fuel supply by oil and gas industry END OF THE WORLD VS END OF THE MONTH Clean investments in fuel supply Share of Clean investments by oil and gas industry END OF THE WORLD VS END OF THE MONTH Distribution of free cash flows by oil and gas industry